The world of energy is rapidly changing before our eyes, providing solutions and creating problems at the same time and in a myriad of ways. Situations that were inconceivable only a few years ago are now the default position: the USA progressing from an ever expanding energy importer to an energy export powerhouse; the Middle East shifting from abundant energy production to a supply shortfall.
Given these rapid and often unpredictable shifts, it might seem foolhardy to attempt to predict what our energy world might look like in half a century; however I would argue that only by taking a long-term view can we make the right decisions required in the short-term.
Energy supply and use is determined by three primary factors: demographics, economics and technology. A few basic features of the future of these three factors are fairly likely, and we can therefore pragmatically use these to set a bedrock for the trajectory our energy system is likely to take.
Our population will be significantly larger: the UN's median expectation is that by the 2060's the global population will have reached approximately 10 billion and will have almost stopped growing.
The economic 'catch-up' that the developing world is currently experiencing, enabling these countries to increase living standards rapidly until they approach developed country levels, is likely to be more or less played out by this time as the world becomes more prosperous overall. This is primarily driven by the growth of the global middle class (approximately 29% of the current world population) by nearly 2.5 times by 2030. This reshaping and resizing of the middle class will primarily occur in emerging economies, provided of course that affordable and widespread access to energy is available to facilitate this transformation.
The day-to-day effect of technology change is hard to perceive, and thus it is often ignored. However the cumulative impact of technology on energy in the long-term should not be underestimated, and could be just as important as the development of demographics and economics.
To give an example of the potential transformative effect of technology on energy use, it is important to compare the digital economy today with the established industrial economy of the last century. Take Google, for example, which contributes approximately 20 times more economic value per unit of energy used than the global average, despite having many of the world's largest data farms, all of which need constant electricity to run. Consequently, one may expect that people can achieve the same or even higher standards of living, and economies achieve a higher economic output, all with much lower energy requirements if the world moves more and more into new digital technologies.
Putting these pieces together, we can make some educated guesses about energy in the coming five decades. Europe and Japan are currently the world's most energy efficient regions with an average consumption rate of 20 to 25 barrels of oil equivalent per person per year (Italy is around 20, Denmark is around 22, the USA is around 52 and the United Arab Emirates is around 75). If this could be improved, with the use of technology and increased levels of efficiency, to a reasonable 15 barrels per person per year, and the rest of the world were able to converge on this standard over the next 50 years, then global energy demand would be approximately 410 million barrels of oil equivalent per day. This would be a 64% increase on global energy demand today of around 250 million barrels of oil equivalent per day.
Therefore, even with the advance of technology, there would still be a huge energy supply challenge for the majority of the world to be brought up to what is today a 'developed world' standard of living. This is the big global challenge for our upcoming generations; meeting it would be the difference between poverty and prosperity for many hundreds of millions, if not billions, of the world's population.
The ramifications of the decisions we are making today will undoubtedly cascade into the future. Therefore if we want to meet these long-term energy challenges we must start taking the right steps today, and equally importantly avoid any oversights which could significantly hinder our progress.
One of the commonly accepted 'right steps' many governments are taking today is in fact one such misstep: the provision of further energy subsidies. Despite the many benefits to the environment and public finances of reforming fossil-fuel subsidies (especially in the case of coal), OECD estimates suggest that continued budgetary support and tax expenditure on fossil fuels in OECD countries accounted for up to $90 billion a year of support in the period from 2005 to 2011. The use of coal continues to increase, especially in emerging economies, and the forecasts indicate that unless serious and concrete policy actions are undertaken, this trend is likely to continue. Irrespective of the economic benefits for emerging markets of energy generated from coal, the environmental impact from coal use is a serious risk and threat for economic prosperity of the growing population of emerging economies. The proposed efforts to mitigate the environmental damage by coal by supporting and incentivizing the construction of more efficient plants, retrofitting old plants, and developing Carbon capture and storage (CCS) technology, are actually impaling the growth of a relatively environmentally friendly and economically superior fossil fuel, natural gas.
Another common expectation is that much of the energy demand growth in the near future will be satisfied by renewables, which excluding hydroelectricity accounts for only 2% of global primary energy demand today. Yet the existing generation of renewables is not sufficiently cheap, scalable or reliable to do this at the required mass scale within the near future.
Wind and solar power are, and always will be, land intensive energy solutions, which take considerable time to build. Estimates by Professor of Environment Vaclav Smil indicate that solar plants still take ten to 100 times the physical space of the entire natural gas supply chain at their theoretical maximum efficiency, and will always provide variable output.
With time, and the required investments, the necessary improvements to these technologies should be possible, and since we will all eventually have to live in a world without fossil fuels it is necessary to properly prepare for that eventuality. However, only when the full life-cycle costs of construction and maintenance of renewables fall in line with available alternatives, and renewables become more reliable due to better energy storage technology, will they effectively rival conventional fuels at the scale required.
With this in mind, the next half century, like the present, is likely to be heavily reliant on fossil fuels, and it would be prudent to shape energy policy with this in mind if we are to ensure secure, reliable, and affordable energy for the world's increasing population.
Future energy outlooks, like the International Energy Agency's Golden Age of Gas report in 2011 and Shell's Lens Scenarios , clearly highlight natural gas as the fossil fuel of the future, and it is expected to be the fastest growing fossil fuel, outpacing oil and coal demand. Demand is likely to be driven by increased use of gas as the cleanest fossil fuel in power generation, as well as rapid expansion in the industrial sector (both feedstock and energy generation) and emergence as a major new fuel option in heavy duty and marine transport.
Fortunately, global natural gas resources are proving more abundant than ever previously thought, with over 250 years of supply available at current consumption rates for natural gas . This abundance comes from both conventional and unconventional sources - 58% and 42% of the total resource respectively - and is geographically dispersed, with about the same quantities in North America (14%) as in the Middle East (17%) or the Asia Pacific region (17%).
History demonstrates that people generally choose economic growth and improvements in living standards over other factors. Therefore energy sources must win on a balance of economic as well as environmental considerations. Shell's "Mountains" primary energy scenario for 2060 suggest the fossil fuels will account for about 62% of demand, down from current level of 80%. The estimated energy mix pie in 50 years under these forecasts is therefore likely to consist of coal (25%), natural gas (24%), oil (13%), nuclear (11%) and renewables and others constituting the remainder. Evidently, the lack of economic alternatives unfortunately leaves cheap fuels such as coal still contributing to a significant part of the energy mix.
If we are to succeed in seeing a less polluted, yet still prosperous, future, governments and societies alike must focus policy on promoting the fuels which strike the right balance between cost, scalability, efficiency, and environmental impact. Today, and for the next 50 years, the fuel that evidently satisfies these parameters is natural gas.